SERVICE BUSINESSES

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Service businesses are enterprises that are established and maintained for
the purpose of providing services (rather than or in addition to products)
to private and/or commercial customers. The American Marketing Association
defined services as "activities, benefits, or satisfactions which
are offered for sale or are provided in connection with the sale of
goods."

The overall service industry is regarded as an already robust one that
should enjoy considerable healthy growth rates in the future as the United
States and other nations continue to move from manufacturing-based
economies to technologically advanced service economies. "The
service sector is a most attractive arena for the aspiring
entrepreneur," confirmed Irving Burstiner in
Start & Run Your Own Profitable Service Business.
"Many service enterprises can be launched with far less money than
the amount of capital typically needed to open a manufacturing, wholesale,
or retail business. Many new service operators are able to begin at home,
thus avoiding the expense of renting, buying, or constructing business
premises. Moreover, end-of-year earnings in the service sector compare
favorably with the profit margins enjoyed by most other types of
enterprise." In addition, service businesses enjoy several other
advantages over their brethren in other business areas. For one thing,
they tend to be local, and they often do not have to contend with the
national or international corporate giants that roam across the
manufacturing, retail, and wholesale industries. Moreover, they generally
do not have to make the same levels of investment in inventory, raw
materials, finished goods, operations, or production management as do
firms engaged in manufacturing, wholesaling, or retailing.

Of course, initial investment requirements can vary significantly from
sector to sector. While some service businesses, like bookkeeping, house
painting, child care, lawn care, housekeeping, and tutoring, can all be
launched with a modest investment by individuals with special skills or
knowledge in those areas, other service businesses require a far greater
investment of money. Attorneys, doctors, and other professionals who make
their living by providing their services to clients make heavy up-front
expenditures (tuition), while entrepreneurs interested in launching
service businesses that require extensive investments in facilities and/or
equipment (hotels, laundromats, car rental agencies, nursing care
facilities, medical offices, etc.) have to make big up-front expenditures
of their own, albeit in different form.

FACTORS IN SERVICE INDUSTRY GROWTH

Researchers point to a number of factors that have accounted for the surge
in service business startups over the last few decades. Many of these
factors reflect fundamental changes in societal structure and character.
W. F. Schoell and J. T. Ivy, authors of
Marketing: Contemporary Concepts and Practices,
cited the following as major reasons for service industry expansion in
North America:

Increased affluence—As consumers have raised their standard of
living, they have increasingly chosen to purchase services such as lawn
maintenance and carpet cleaning that they previously took care of
themselves.

Increased leisure time—Some segments of the population have been
able to garner larger chunks of free time; this trend, coupled with
increased wealth, has spurred a higher demand for certain service
businesses such as travel agencies and resorts, adult education courses,
guide services, golf courses, health clubs, etc.

Changing work force demographics—Over the past few decades,
increasing numbers of women have entered the work force. This has
spurred greater demand for services in such realms as child care,
housekeeping, drycleaning, etc.

Greater life expectancy—Another development that has had a
particular impact on certain service sectors, particularly in the health
care industries.

Increased complexity of products/technological
advancement—High-tech products have created a corresponding
increase in demand for specialists who can fix and maintain those
products (computers, cars, electronic equipment, etc.).

Increased complexity of life—Many service sectors have enjoyed
tremendous growth because of their orientation toward helping
individuals and businesses stay on top of the many facets of
today's fast-paced society. Tax preparers, psychiatrists and
counselors, and legal advisors are good examples.

In addition, many service-oriented businesses are, by their very nature,
slanted toward meeting the
needs of one of two markets: individual consumers or other
businesses/organizations. Of course, some service establishments, like
carpet cleaning companies, can market their services to both client
categories. But the majority of service businesses place their emphasis on
meeting the needs of one market segment or the other. For example, a pet
grooming establishment will not waste its advertising dollars trying to
reach other businesses; its primary clients are going to be individual
consumers simply because of the nature of the services they offer.
Conversely, the primary target of a company that provides security
personnel is going to be commercial establishments. Entrepreneurs that
hope to market their services primarily to organizations rather than
individuals should note that, on the whole, such businesses require
greater capital investment at the outset.

KEYS TO SERVICE BUSINESS SUCCESS

"Service supplier skill should be distinguished on at least two
levels," wrote Glenn Bassett, author of
Operations Management for Service Industries.
"The first is the technical product/service knowledge level. The
service giver is expected to know the offering in depth and detail so that
information about its utility and application can be provided on demand.
He or she must also be technically competent to deliver the service
expected, adapting as needed to varied or changing customer need. The
second level of skill pertains to customer relationship. Here it is often
as simple as whether the service-giver treats the customer as an object to
be controlled and used, or as a unique, important individual to be
served."

Entrepreneurs engaged in service businesses also need to recognize how
service marketing differs from product marketing. "Service
marketing," said Burstiner, "can be far more challenging
than the marketing of products because of these three distinctive
characteristics of service offerings: 1) Services are intangible; 2)
Services are perishable; 3) Services cannot be separated from the service
providers." Finally, service businesses need to consider the way in
which they distribute their services. Most service businesses can be
grouped according to the methodology with which they deliver their
services. In other words, does the company bring its service to the
customer, or does the customer go to the firm to receive the service?
"In some cases," wrote Bateman and Zeithaml in
Management: Function and Strategy,
"there is no choice. The plumber or house painter has to go to the
work. Conversely, the customer goes to the restaurant, and the patient has
to go to the hospital for the operation. Some services have options.
Either the TV repairperson can go to the customer or the customer delivers
the TV to the back room (the repair shop). A service that has
traditionally required the customer to come to its facility has a
strategic advantage in changing that tradition." Indeed, owners of
service businesses should examine this facet of their business closely to
look for ways of realizing an advantage over competitors. In fact,
customer convenience is—next to quality of service
rendered—perhaps the single most important factor in securing and
retaining new customers.